The latest data on China's property market reveals symptoms that will need more than deleveraging measures, analysts said.
The growth of real estate investment in August was 0.1 percentage point more than the January-July period despite slowing growth in land sales, data from the National Bureau of Statistics (NBS) showed.
New home prices in 100 surveyed cities continued to rise for the 16th-consecutive month in August on a month-on-month basis, according to data compiled by the ChinaIndex Academy.
Concerns have been raised over the excessive issuing of loans, which fueled the recent increase in record-breaking land deals and panic home buying in several cities, which Zhang Dawei, chief analyst wit Centaline Property, termed as "irrationalities."
Improving deleveraging would be a plausible move to cool the market, but Ma Jun, chief research economist at the People's Bank of China (PBOC), called for discretion.
"Abrupt deleveraging could shoot down the growth rate and hurt employment," Ma said, adding that a balance must be struck between short-term and long-term to ward off a crisis.
The government and personal leverage rate of China is not high when viewed internationally, so the short-term task is to curb and stabilize the growth in China's general leverage rate, according to Yi Gang, deputy governor of PBOC.
Deleveraging alone is unlikely to defuse tensions in the property market, while developing the real economy and cutting back reliance on the real estate are now essential, said Fan Xiaochong, vice president of Sunshine 100, a developer focused on second- and third-tier cities.
August lending data released by the central bank suggests that more than 600 billion yuan in mortgage loans was issued, an increase of more than 100 billion yuan from a month earlier.
Despite the substantial increase, lenders see the mortgages, a relatively small portion of the all lending, to be at a safe level as a lot of countries have a ratio of between 40 to 50 percent, said PBOC governor Zhou Xiaochuan earlier this year.
When looking at the Chinese economy as a whole, deleveraging will not necessarily channel resources toward strengthening the weak links, said Huang Zhiling, chief economist of the China Construction Bank.
China's property market has become increasingly diversified, with major cities reporting record prices and smaller cities struggling to shift the glut, Sheng Laiyun, NBS spokesperson, said Tuesday.
While stabilizing the growth in leverage rate, targeted efforts must be made to avoid property bubbles in first- and second-tier cities, said Chen Sheng, executive director of China Real Estate Data Academy in Shanghai.
Chen said everything boils down to developing new industries to create new pillars for the economy.
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